Slack & Co.: The German Way

“Social Collaboration” platforms like Slack, Sharepoint or Yammer promise more transparency and employee participation within enterprises. Long ago, one entire economy has found its own way to achieve this: Christopher Olk introduces you to German businesses, and their “Mitbestimmung”.

There is a success story that is often being told about the German economy. Were this story to be turned into a TV or Netflix serial, its pilot episode would probably have been set in the immediate aftermath of World War II, and titled Wirtschaftswunder. Among its protagonists would be prominent figures like the first post-war chancellor Konrad Adenauer, his minister of economics Ludwig Erhard, as well as one George C. Marshall. Other politicians — among them, arguably, chancellors Gerhard Schroeder and Angela Merkel — may also be considered a part of the later seasons’ cast. And, of course, its major plot twists would be Germany’s post-war division and then 1991 reunion. The show’s real crowd-pleasers, however, could be all those smart engineers and highly skilled workers that made the German auto and machine industries so successful. With both ingenuity and diligence, they helped to build the likes of Mercedes, Volkswagen or Siemens, as well as many less-known small and middle-sized enterprises. Many of these latter Mittelstand companies, often referred to as “Hidden Champions”, are world-market leaders in their respective industry niche.

While all these characters can more or less be considered the stars of the show, there is yet one more supporting role that might not have received the attention it deserves. In fact, Anglo-American observers even like to speak of “Rhine capitalism”, as this role is a cultural particularity not to be found elsewhere to a similar extent — namely: Mitbestimmung, translated best, however unsatisfyingly, as “co-determination”. It is the principle that employees ought to have a say in their employer’s decisions, at least in matters which immediately affect them. In Germany, this principle is not only applied indirectly through trade unions, who negotiate a wage level for an entire industry on their members’ behalf, but also through a worker’s council: On the one hand, this council participates in managerial decision-making directly, as for instance layoffs need to be negotiated between management and council. On the other, it has the right to dispatch a certain number of employee representatives to the supervisory board.

This mechanism has been anchored in German corporate law after World War II, although the first federal legislation to its effect was passed in 1920, and its predecessors date as early as 1848. Before the establishment of co-determination had in fact stood a period of strikes and demands for fairer working conditions, if not revolutionary overthrow of capitalism as such. Whereas the earliest councils had been legalized in Prussia explicitly with the intent to take the wind out of the more radical workers’ movements’ sails (imagine which as coloured in a bright red), it eventually turned out that the councils did not only make the workplace, and thereby society as a whole, more stable and more democratic — but also that the businesses themselves profited significantly from them.

Empowerment, Efficiency and economic growth

Over time, the employee representatives proved to have their employer’s long-term success in mind, as they were often willing to compromise in times of crisis — interestingly, much more so than their English-speaking colleagues. A particularly good example thereof is so-called Kurzarbeit: an agreement made between employers and employees during the 2008 recession to have working hours reduced, rather than workers laid off, which helped to get the German economy through that year relatively unscathed.

The benefits of codetermination already become apparent on the individual level: Workers that participate, and hence feel a sense of purpose and empowerment, have been found to be more productive, more creative, and more loyal. Work councils are also naturally good at monitoring managerial performance and feeding that information back to the board via their representatives, thereby increasing overall efficiency. While codetermination may naturally also have adverse effects, for instance at the expense of short-term shareholder value, most scholars agree that it benefits the German economy by promoting fairness and giving employees a sense of empowerment, while at the same time rendering companies comparably agile and innovative.

So all in all, codetermination as such appears to be a pretty decent fellow. But so far, all this has only proved to be so in 20th century industrial Germany. What about a whole other setting — namely the digital, platform-based information economy of our days? Is codetermination still a reasonable principle today?

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